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Turnbull’s U-turn
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SYDNEY
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MALCOLM TURNBULL, Australia’s prime minister, has changed his tune. Just last week he dismissed calls for an inquiry into Australia’s banks, saying it would be an expensive exercise that “doesn’t do anything other than write a report”. But on November 30th, Mr Turnbull abruptly announced a royal commission, Australia’s most wide-ranging form of inquiry, into “alleged misconduct” not just by banks but in other financial services as well.
Only hours earlier, Australia’s four biggest banks—the Australia and New Zealand Banking Group, the Commonwealth Bank of Australia, the National Australia Bank and Westpac Banking Corporation—had themselves called for an inquiry. Their chairmen and chief executives wrote to the federal government asking for an inquiry to end uncertainty and “restore trust, respect and confidence”.
Australia weathered the financial crisis a decade ago without a recession—indeed in 2018 it is poised to enter its 27th ...

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Ten years after the crisis, Europe’s banks face a glut of new rules
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Think of a number
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Regulating European banks
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How—and why—to end the war in Yemen
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Think of a number
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FOR those oddballs whose hearts sing at the thought of bank regulation, Europe is a pretty good place to be. No fewer than five lots of rules are about to come into force, are near completion or are due for overhaul. They will open up European banking to more competition, tighten rules on trading, dent reported profits and boost capital requirements. Although they should also make Europe’s financial system healthier, bankers—after a decade of ever-tightening regulation since the crisis of 2007-08—may be less enthused.
Start with the extra ...

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A purge of Russia’s banks is not over yet
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Sobering up
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Russia’s banking clean-up
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A hated tax but a fair one
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Sobering up
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Elvira’s mad again
Elvira’s mad again
WHEN Elvira Nabiullina took over the governorship of the Russian Central Bank (CBR) in 2013, she faced a bloated and leaky finance sector with over 900 banks. Since then, more than 340 have lost their licences. Another 35 have been rescued, including, in recent months, Otkritie, once the country’s biggest private lender by assets, and B&amp;N Bank, its 12th largest. The costs have been steep. According to Fitch, a ratings agency, over 2.7trn roubles ($46bn, some 3.2% of GDP in 2016) have been spent on loans to rescued banks and payments to insured depositors. Fitch reckons ...

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Italy’s fourth-biggest bank returns to the stockmarket
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Getting up again
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Monte dei Paschi di Siena
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A tsar is born
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Monte dei Paschi gets to its feet
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MILAN
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A TELEVISION advertisement for Monte dei Paschi di Siena begins with a toddler tumbling and a gymnast stumbling. “Falling is the first thing we learn,” declares the voice-over. “The second is getting up again.” Italy’s fourth-biggest bank and the world’s oldest, which was bailed out by the Italian government in July, has had several bruising falls over the years. On October 25th it returned to the stockmarket after a ten-month hiatus—the latest stage of its plan to get back on its ...

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Competition in the credit-card business will only intensify
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Shuffle and deal
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American Express
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A tsar is born
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Shuffle and deal
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NEW YORK
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HE IS leaving with the share price rising and the announcement, on October 18th, of earnings that were largely well received. Better still, Kenneth Chenault, American Express’s chief executive for 16 years, accomplished a feat rare in the upper reaches of American finance: to stand down without an obvious helping shove. No grandstanding senators hounded him out (see Wells Fargo). No boardroom coup hastened the end (Citigroup). The financial crisis left him untouched (take your pick). His successor, ...

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Technology is reshaping the financing of firms that sell to other firms, and leading banks into new alliances
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The missing link
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Supply-chain finance
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China’s Xi Jinping has more clout than Donald Trump. The world should be wary
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The missing link
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IN 2015 Kiddyum, a small company from Manchester that provides frozen ready-meals for children, won a contract from Sainsbury’s, a big British supermarket chain. Jayne Hynes, the founder, was delighted. But sudden success might have choked Kiddyum’s cashflow. Sainsbury’s pays its suppliers in 60 days; Ms Hynes must pay hers in only 30.
In fact Kiddyum gets its cash within a few days. Once approved by Sainsbury’s, its invoices are loaded onto the supermarket’s supply-chain ...

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America’s politicians try to control Chinese firms abroad. It is a dangerous game
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The nuclear option
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Schumpeter
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China’s Xi Jinping has more clout than Donald Trump. The world should be wary
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Schumpeter
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WARS are fought with weapons, but also with money. To understand the global balance of power in the coming decades, it helps to pay attention to the commercial subplot of the North Korean crisis. For the first time, America is attempting to use its full legal and financial might to change the behaviour of Chinese companies and banks, which it believes are propping up North Korea by breaking UN and American sanctions. Some American politicians have concluded that, as China’s firms have integrated with the global ...

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A Chinese carmaker agrees to buy a Danish bank
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Freezers to finance
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Chinese acquisitions
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It is not too late to stop the break-up of Spain
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From freezers to finance
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A COMPANY that moves up the value chain from refrigerator parts to cars is impressive but not that surprising. A car company that buys an investment bank is audacious. But Zhejiang Geely Holding Group, a conglomerate based in Hangzhou, China, did not become big by paring its ambitions. Having successfully made the fridge-parts-to-cars transition at home, it went global in 2010. It acquired Volvo, a Swedish carmaker, from Ford of America. Now Geely is back in Scandinavia for another acquisition. This time it is buying one of Denmark’s biggest banks.
Saxo ...

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Retail banks’ adventures abroad do not usually pay
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Travel sickness
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Cross-border banking
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Closing in on cancer
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Travel sickness
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NOT everybody—or every business—travels well. Retailers from Walmart to Tesco have faltered in forays into foreign lands. Banks, too, often fancy that success at home can be reproduced abroad. In meeting the needs of big companies, they are often right. Global corporations seem to want global banks. But in retail banking, serving households and small businesses, they are usually mistaken.
Or so concludes a report by Lorraine Quoirez and her colleagues at UBS, examining the performance of seven international banks (BBVA, Citigroup, HSBC, ING, Santander, Société Générale and Standard ...

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The shape of global banking has turned upside down
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Changing maps
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Banking
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Blanket repression is the wrong way to deal with political Islamists
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Changing maps
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NEW YORK
IN THE 1980s, when Citicorp was America’s largest bank and pursuing every avenue for international expansion, John Reed, the bank’s boss, would muse about moving its headquarters to a neutral location, notably the moon. Such sentiments are inconceivable today. Jamie Dimon, boss of JPMorgan Chase, Citi’s successor atop the league tables, recently said he is an American “patriot” first, head of a bank second. His strategy, though hardly shunning international markets, reflects this.
Mr Dimon turned down several big foreign acquisitions before and during the financial ...

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Business this week
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The death of the internal combustion engine
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An internal memo written by a male engineer at Google that claimed biological factors accounted for the gender gap in Silicon Valley sparked an uproar. James Damore said he had wanted to start an “honest discussion” about the lack of women in senior jobs, a discussion he argued was impossible in the tech industry because of an intolerance of views from outside the liberal mainstream. Google subsequently sacked Mr Damore for violating its code of conduct. See article.
After weeks of negotiations, Vantiv struck a deal to buy Worldpay, which the companies valued at £9.3bn ($12bn). Based in Cincinnati, Vantiv is one of America’s biggest processors of credit-card payments and electronic money-transfers. Worldpay is Britain’s biggest payment-processor. Vantiv’s shareholders will own 57% of the combined group, to be called Worldpay.
Not so intelligent
Commonwealth Bank of Australia scrapped bonuses for its ...

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Liu Xiaobo’s death holds a message for China
The Trump administration nominated Randal Quarles to be vice-chairman for supervision at the Federal Reserve. Mr Quarles is a former investment manager and Treasury official. He is sympathetic to the industry’s push for a lighter regulatory touch, and has supported a Republican recommendation to restrict the Fed’s flexibility on interest rates by basing those decisions on a mathematical formula. See article.
Steady as she goes
Speaking to Congress, Janet Yellen said that although inflation remained an uncertainty, the Fed was on course to unwind the asset portfolio it had accumulated since the financial crisis and to continue with rate rises. The guessing game has already begun about whether Donald Trump will choose a new chairman of the Fed when Ms Yellen’s term is up in February.
The Bank of Canada raised interest rates for the first time in seven years, increasing its benchmark rate by a quarter of a percentage point to 0.75%. The central bank said it was responding to strong economic growth. ...

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World’s biggest banks
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Liu Xiaobo’s death holds a message for China
At the end of 2016, and for the fifth year running, Industrial and Commercial Bank of China (ICBC) was the world’s biggest bank as measured by tier-1 capital (mostly retained earnings and common stock), according to the Banker. Chinese and American banks again dominate the top ten: in the only change from last year’s ranking, Bank of America reclaimed the fifth place it lost to Agricultural Bank of China in 2015. China’s banking market remains the world’s biggest by assets and tier-1 capital; last year it further strengthened its lead over America. Growth in both countries, however, was driven by second-tier banks; China’s big-four lenders may be reaching their size limit.
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20170715
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A crackdown on financial crime has led global banks to run from risk. That has caused problems for swathes of deserving customers
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The great unbanking
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Financial derisking
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Why Germany’s current-account surplus is bad for the world economy
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Rolling up the welcome mat
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WHEN some of Latvia’s banks became infected with dirty money, all paid the price. “Correspondent” banks—international banks that clear smaller banks’ foreign-currency transactions through big financial centres—began detaching from the Baltic country. JPMorgan Chase withdrew in 2013. By last year only Deutsche Bank was left. It soon stopped serving half of Latvia’s lenders, and in March began dropping the rest, leaving them at risk of being unable to ...

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A taxpayer-funded liquidation of two Italian lenders is ugly but pragmatic
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Buckets of ducats
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European banks
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Trump’s Washington is paralysed
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European banks
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MILAN
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BANKS sicken slowly but die fast. For years Banca Popolare di Vicenza and Veneto Banca, in the prosperous Veneto, in north-east Italy, had been plagued by mismanagement. Even criminal investigations are under way. For months the Italian government had been wrangling with European authorities over the terms of a bail-out. For weeks it had seemed improbable that private investors would put in money alongside the state, as the European Commission insisted.
On June 23rd the ...

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Europe’s framework for dealing with troubled banks is working, but has one big drawback
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Senior moment
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European banks
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Trump’s Washington is paralysed
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Senior moment
IF ONE goal has animated the reform of finance since the crisis of 2007-08, it has been a desire to spare taxpayers from having to pick up the bill for bank failures. Regulators have introduced stress tests to see how banks stand up to shocks; America’s latest round of tests concluded this week (see article). They have forced banks to fund themselves with more equity and to issue layers of debt that are earmarked for losses in the event of severe trouble. They have even asked banks to draw up plans for their own dismemberment in the event of failure.
The first real tests of this post-crisis machinery were always going to happen in Europe, which has ...

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Canadian banks don’t face a crisis. They do face a strategic trilemma
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Escape from Canada
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Schumpeter
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A landslide legislative victory would make France’s president a potent force
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Schumpeter
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AS the global financial system was engulfed in crisis in 2008-10, only one set of banks in Europe and North America stayed serene and safe: Canada’s big five lenders. They were largely untouched by the madness south of the border and across the pond and kept churning out profits. After the crisis experts went on pilgrimages to Toronto and Ottawa to study the Canadian way. The country’s central-bank governor, Mark Carney, became a financial celebrity who was headhunted to run the Bank of England.
Canada’s banks quickly joined ...

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A state bail-out of ailing Monte dei Paschi draws near
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Pastures new?
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Italian banks
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— Terror and the internet — Theresa May’s failed gamble
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Pastures new
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Not the world’s oldest customer
Not the world’s oldest customer
HELP is at hand for the world’s oldest bank. On June 1st the European Commission said it had agreed in principle to a bail-out by the Italian government of Monte dei Paschi di Siena, founded in 1472. For years Monte dei Paschi, Italy’s fourth-biggest bank by assets, has lurched from crisis to crisis. Last July it flunked a test by European supervisors of its capital strength. In December a private-sector restructuring scheme came to naught and the state decided to step in.
The details, including the size of the ...

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A relatively tidy clean-up of Spain’s latest banking mess
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The popular mandate
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Banco Popular
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— Terror and the internet — Theresa May’s failed gamble
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The popular mandate
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MADRID
EVEN a bank failure can be presented as a triumph. This week Banco Popular, a big Spanish lender, endured a run. Depositors were said to be withdrawing €2bn ($2.2bn) a day. The bank lost half its stockmarket value in four days, as a self-imposed deadline to find a saviour loomed. On June 6th, it was declared by the Single Resolution Board (SRB), an independent agency set up by the European Commission in 2015 and charged with winding down banks, to be “failing or likely to fail”. The next morning, Santander, Spain’s biggest bank, announced its purchase for ...

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Local lenders groan about regulation, but hope the load will be lightened
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Relief rally
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America’s community banks
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The middle has fallen out of British politics
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Relief rally
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WASHINGTON, DC
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A FEW weeks ago Standard Financial, a bank with assets of just $488m and a mere nine branches, merged with Allegheny Valley Bancorp, a slightly smaller neighbour in the suburbs of Pittsburgh. The main reason for the deal, says Tim Zimmerman, Standard’s chief executive, was the rising cost of regulation—though competition from PNC, a $371bn colossus based in the city, also played a part. “Without the regulatory overreach…since the crisis,” Mr ...